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Debt Problems And Payday Loans

debt
Payday Loans

This article is not intending to provide anyone with a get out of jail free card or give them any secrets or tricks of the trade for avoiding debts which they are contractually bound to pay.  It is however quite often the case that debtors are vulnerable, confused and get to the point where they are unsure as to what they have or have not agreed.  With this in mind, if you find yourself in a position where you are being pursued for a debt that you are unsure about.... read on.

Everyday there appears to be something new and scathing written about payday loan companies in the newspapers.  Without being too judgmental, there is obviously a huge market for such loans, especially since the banks stopped lending to people.

So why all the bad publicity?  Well, if you have taken out a payday loan and thereafter have not been in a position to make the contractual repayments, you will have seen your debt grow exponentially and in many cases, the interest and fees applied are far too high for a debtor to repay leaving them in dire straights.

There is of course the counter argument that the debtor knew what they were getting into and if they could not afford to repay, then they should not have taken out the loan.  Putting all this to one side, what can you do if you find yourself in a position whereby you cannot repay - is there anything you can do?

The first thing anyone in debt should do is to address the debt head on.  Contact the lender, inform them you cannot repay.  There are specialist organisations that can help you such as the debt charity, Stepchange.org or the Citizens Advice Bureau.  One point worth making here is that there are numerous debt management companies who claim they can/will assist you.  This is not always the case.  They will charge you a monthly fee whereas a charity will not.  I would always advise using a charity over a debt management company that you have to make regular payments to (for larger debts or if you have assets to protect you should contact a Solicitor as soon as possible).

If you want to be pro-active, there are steps you can take to ensure your lender has followed the correct procedure when you took out the loan. If they have not, it could mean you are not contractually bound to repay anything.

If your lender takes you to court there is a burden of proof they have to pass to prove to the court that:-

1.  It was you who owes the debt
2.  That you received the money

Therefore, the first thing you should request from your lender, is a copy of your loan agreement.  You are entitled to this under the Consumer Credit Act (you may have to pay a fee of £1.00 to the lender to obtain it).

Quite often, the lender will not be able to supply an original signed loan agreement. They can however provide a 'true copy' which means that all the agreed information such as amount borrowed, dates, interest rates etc must be shown.  It does not however have to be signed.

If they cannot provide this, they cannot show the debt is legally owing and should not attempt any further collection from you, they certainly would not be successful in court if you disputed ever taking out the loan.

Also it has been reported that payday loan companies have been the victim of fraud on a wide scale.  People have been taking out loans using identities not belonging to them - hence identity theft fraud.  To this end, if the matter went to court, the payday loan company would also need to prove it was you who took out the loan.  Have they got any identification documents showing your picture and address from when you entered into the agreement?  If not, why not?  How can they prove it was you?

Thirdly, the bank the money was paid into, they will have a sort code and account number.  If this is not yours, then who have they paid the money to?

If you feel you have been the victim of identity fraud, you should report this to the police.  You may also wish to report the matter to Trading Standards as any company giving credit should ensure they are lending to the correct person.

It will be interesting to see what happens in the future with payday loan companies.  There is a backlash which is starting to cause them significant problems with many of these companies shutting down since the Office of Fair Trading have issued new guidelines.  Even the Church has decided to take them on by stating that they are going to re-introduce the services of credit unions to compete with payday loan lenders.

Richard Howlett is a solicitor at Selachii LLP - 02077925649

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